Technical Analysis vs Fundamentals

I have shared some methods to invest before ...

When to Buy at What Price

Why use EPS and PE ?

...

Those are within the category of fundamental analysis.  Basically you are trying to understand what a business is doing and how it 'may' perform in future.  Fundamentalist is trying to differentiate the big and important factors from the smaller factors or rumors ...

Sometimes even though the fundamental of a business is strong but its stock price may still go down if the demand is suddenly drop while the supply remains the same.  So even a totally rediculous rumor can affect stock price seriously in a particular time, as long as the demand believes it.  As the description of this blog mention, 90% of the people will take silly rumors as truth.

Fundamental also include effect of news.  If a company announces good year end result, its stock price may most probably go up.  However, you may observe that the stock price actually go up even before the announcement is made - its called react before the news.

As you may see now, fundamental analysis is great for long term wealth accumulation from time A to time B.  However, there may be a lot of ups and downs in between.  If you are able to catch the ups and downs in between you may be able to gain more, like wise if you 'guess' wrong, then you may lose more than what long term gain can get you.

You may NOT be able go guess right the lowest and the top points EVERY times, but there is a SYSTEMATIC / Statistical way to identify (1) end of the lowest point and (2) the end of the highest peak.

In other words, you may use Technical Analysis to catch the

(1) after lowest point and

(2) after the peak

The idea is this ... no matter if it is rumor or insider news, it will be reflected on the actual buy and sell price.  That's why Technical Analysis can NEVER catch or predict the actual bottom or peak, but it can usually catch the after effect.

If all these are TRUE, this is what you can do to lower your risk while maintaining your reward.

1.  use fundamental to filter out which stock to buy ( can keep long term )

2.  use technical analysis to 'further' narrowing the 'in' and 'out' timing.

... stay tune ... you are able to reach the 'sure win' arena ...

Bullish and Bearish Indicators for Trading Forex

 Fundamental and Technical Indicators

Generally, seasoned traders cannot rely solely on the fundamental online forex news to determine entry and exit points for forex trading positions, but use a combination of technical indicators for optimum buying and selling opportunities in trading.

In many cases, more than one indicator is used, — whether fundamental or technical — with another indicator or group of indicators confirming each other to ensure the likelihood of a profitable trade.

Bullish Indicators

As an example, a Euro currency forecast or a USD Euro forecast might include the following technical indicators to provide the trader with optimum trading opportunities on the upside:

• Upside breakout of trend lines – Often, a trend line with a downward slant showing declining highs, which breaks out to the upside breaking through key resistance, indicates a good possibility of a trend reversal with a continuing bullish move.

• Divergences in the RSI and MACD – The Relative Strength Index or RSI and the Moving Average Convergence Divergence or MACD indicator make up two key technical indicators which signal a change to the upside in the overall trend when showing regular divergences versus the price after a period of overall downward price action. On the other hand, bullish hidden divergence indicates that a continuation of an upwards trend may soon resume.

• Strong nearby levels of support in the price chart – if the price chart shows a long sideways trend with strong levels of buying at certain prices, especially when near to the current price level, these indicate a likely move to the upside.


Individually interpreted, these indicators could give false positive results. Nevertheless, when taken in combination, they often provide a more solid basis for establishing a long position.

Bearish Indicators

Bearish indicators mirror bullish indicators and will often also be included in a USD Euro forecast or in a Euro currency forecast. Technical indicators generally negate fundamental events in the online forex news, with the trading maxim “price discounts all”.

• Trend lines which break out to the downside – generally, when a trend line begins to slope downwards and breaks key support levels, gives an indication that the bearish move will continue.

• Bearish divergences in the RSI and MACD – The Relative Strength Index or RSI and the Moving Average Convergence Divergence or MACD indicator make up two key technical indicators which signal a change to the downside in the overall trend when showing regular divergences versus the price after a period of steady upside movement. On the other hand, bearish hidden divergence indicates that a continuation of a downwards trend may soon resume.

• Strong nearby levels of resistance in the price chart – if the price chart shows a long sideways trend with strong levels of selling at certain prices, especially when near the current price level, these indicate a likely move to the downside.

As with the bullish indicators, when individually interpreted the bearish indicators could give false positive results and are much more effective when interpreted in combination. Although technical indicators do not rely on the online forex news, many traders use the realtime forex news to initiate and exit positions. Visit here: forexguidehowto.blogspot.com/

While keeping an eye on realtime forex news may provide traders with insight to short term exchange rate moves, technical traders rely on other key indicators to establish long and short positions in the forex market.

Forex Market Research Techniques

Forex traders generally use the Online Forex News, as well as the realtime forex news to determine which currency pairs would be the most probable to yield a worthwhile profit before initiating trades in the forex market.  

As an example, some currency pairs may be more challenging to trade than others and may not be as suitable for less experienced traders, such as AUD/USD. The exchange rate AUD USD has recently traded with increased volatility due to rising commodity prices, such as the price of crude oil and gold.

In addition to volatility, other considerations that traders must consider consist of how deep the markets in the currency pair traded, and how wide the bid/offer spreads are. Also, how much the currency pair is subject to sharp exchange rate movements upon the release of key economic data.

A review of the USD forex news can give a trader a sense of what currency pairs may be the best to trade for their level of experience and risk tolerance. For example, EUR/USD generally is one of the most liquid forex currency pairs with long sweeping moves and in many cases very narrow bid/offer spreads.

Fundamental and Technical Market Research

After the trader has determined which currency pairs offer the best opportunities for profitable trades, they can then begin doing research to determine entry and exit points for their trades. Most successful traders employ a combination of both fundamental and technical analysis in their trading strategies.

The way traders sometimes combine these two techniques, is to use technical analysis for timing entry and take profit points by using price graphs and other short term technical indicators. Conversely, by using fundamental analysis, traders can more accurately determine mid term and long term trends for exchange rate movements.

Making a Euro Currency Forecast

As an example, a trader might make a long term USD Euro forecast based on fundamentals such as historical interest rate differentials, European Central Bank monetary policy and current events.

Recently, some European nations such as Greece and Ireland have received bailouts from the ECB and the IMF to shore up their beleaguered economies. These developments have weighed on the EUR/USD exchange rate.

Nevertheless, according to the daily forex news, inflation concerns due to increasing productivity in nations such as Germany and France have prompted the ECB to raise interest rates, which would be beneficial for the value of the Euro against the U.S. Dollar and other currencies.

Using Technical Analysis for Entering and Exiting Trades

Once the trader has decided on a mid to long term direction, they often use technical indicators such as oscillators to determine optimum entry and exit points in the currency pair’s price action.

An oscillator such as the Relative Strength Indicator, will give the trader an idea when the currency pair is either overbought or oversold, giving the trader a good indication of when to initiate or liquidate a trade.

Incorporating both technical and fundamental analysis to a trading plan seems to be the most effective way used by successful traders for their Trading Strategies. A good foundation in both forms of analysis will yield the best results.

Cut Loss, Cut Lost or Cut Loose ?

Many have asked if Cut Loss is within my fundamentals and why I purposely avoid talking about them when I could have.  Well, because that is also another myth about it ... :)

Cut Loss basically refers to a situation where you get on a finance vehicle hoping for X return but turns out a Y loss instead.  Therefore you get out of that vehicle hoping to minimize the loss.

"I would sell when it gains or loss 20%."

The missing thing is "Time".  If you set an expectation without time, its like a dream never comes true.  You will end up letting your emotion makes decisions.

The 2nd major thing is ... what will you do with the money after you cut it loss ?  Says if you are lossing 10% now and may expect to loss another 10% further, but if you get out of that situation and get into another one that loss 20% eventually, its still a terribly bad deal !

If you know where you go Next,

then yes you may get out of the old lane.

Some may says if you just take it out and do nothing with it, 0% loss is better than lossing 10%.  Actually if you really understand the fundamentals of investment, doing nothing is the number 1 biggest mistake.  Doing nothing is actually much worse than lossing in an investment.  You may relate this to how to judge a good fund manager.

When you made a decision to invest into anything, you are actually testing your own belief, knowledge and ability to judge.  If result goes opposite of what you expected, that means you made mistake.  A mistake you made, is a  golden opportunity knocking on your door - either to save you huge amount of money in future, or increase the likelihood to reach your finance goal (conversion ratio, to be shared in later posting). 

Do nothing in investment basically also means learn nothing and therefore reach no where.

Not to forget, the fundamental way to buy into an investment vehicle is as if to start a business yourself. A good business owner does not just close down the business the first moment it lose money. When result goes opposite way, a good business owner will first re-analyse his initial assessment.  If he has done good fundamental assesment before, they should normally still stand firm.  Then he will assess current situation, "is it because the situation has changed and he needs a new assessment ?"  Eventually he will find out exactly why the result goes the other way.  If the cause is also fundamental and continue to exist in that investment vehicle, then yes, cut loss may be required.  If the cause of loss is something out of the business control like a global recession, the you should compare the loss with other similar type of businesses that you didn't invest in.  

A good business will loss less when everybody else are lossing.

So you cut loss when;

1. you realized you have made a mistake in your previous decision, you have learned from it and you will never repeat that mistake.

2. you found out some new information that you can no longer fine tune your investment method to cater for that.

3. you have found another better finance tool and you need more funds.

So if you really read above GOOD reasons to cut loss ... you may realize, cut loss has Nothing to do with LOSES at all !!  You may have to Cut Loss from time to time, no matter if it is earning or lossing.

Cut Lost is like Get Lost or Go Away, Leave me Alone !  Either you have earned enough and really get fed up with it, you just want it to get lost ...

Cut Loose is temporary let it go for a moment knowning that you will come back to it again.

So which route are you taking ?

Fundamentals are Noises ?

Very frequently investors who believe in Technical Analysis say that Fundamentals are useless and they treat them as noises !

Actually they are refering to Published News which they think are fundamentals but actually NOT.

Usually this group of people thought a good figure report should bring the price up but realized it did not and caused them to lose money.  Thats why they decided 'fundamentals' are noises.

Put aside speculation and rumors, it is a fact that sometimes Official Published Info does NOT affect the market price the way it should ... and this is why.

The fundamental of a business does not change Instantly.  Before the official report is published, the person who run the business already know the 'health' of his business.  Even people who work in that company would have an idea how the business is doing without any reports.  Suppliers, customers, contractors would also know something too although at different context and extend.  All these form an Expectation !  

Fundamental of price movement is Supply and Demand.  When the Published News exceed the Expectation, Demand will rise.  Like wise when the report did not meet the Expectation, demand falls.

So if you only look at and wait for a report to be published without first understanding what the expectations were, you really need to learn more fundamentals.  Else no matter how good your technical analysis is, it may harm you as much as you think it helps you.

The real Fundamentals are;

1. What is the business doing and why can it be success for another 10 years ?
2. Who is running the business that you have confident in ?
3. How much is this business worth, its real value ?
4. etc.

Fundamentals don't change just because of one announcement but can be observed through a series of events.

An example of fundamental analysis is When to Buy at What Price.

George Soros - good guy or bad ?

who the hell are you to comment about me ?

There are a few questions why George Soros is not in my radar in this blog.

Well, because it isn't time yet.  But as usual, since you ask, I will jump the queue and talk a bit about him.

There will be 2 topics in this blog that will lead to Soros.

1.  The Art of investment.

2.  Investment is a game for the Rich.

Unlike Fundamental Assessment like Buffets and Technical Analysis by some other successful investors, Soros is one of those few who do not fall exactly into either of that 2 categories.

As mentioned before, our today's money system is by large at fault but no one really can fix it.  Fundamentalists basically try to filter out the noises by sticking to good and strong businesses.  Technicalists try to follow the trend making some money when they see the big guys move.  

Soros however is the type who perfectly understand how volunerable of our finance system is but do not get bother by it, not even the social problems it may create, and then further exploit it to gain maximum out of it.  He is slightly different than "If you cann't beat it, join it" because at his scale, he sometimes create the chaos or problems himself.

Soros still do fundamental assessment NOT before but usually after he invests.  Fundamental results only add strength to his already decided investment to keep longer.  Soros only look at trends at the area where he doesn't invest too much on because he usually create the trends, why 'chase' the trend you created yourself ?

It takes money to earn more money, no one else practise this principle better than Soros.  People who don't like Soros could easily agree to this point.  Like our famous si chedet.

Despite the chaos and how many claim him as a speculator, Soros way of investment is actually quite systematic.  Although it is not as procedurals as Fundamentalists, but nevertheless quite a system by itself.  Since his system is not quatifiable so its called a investment philosophy more than a system at times.  That is also where I call it The Art of Investment - to cover all the other things Science is not covering.

Art doesn't mean NOT Science.  It just mean there is something to it that we cann't fully explain yet.  In Art, we cannot guarantee the same results even if you follow exactly what was done.

A true art is usually not complicated.  A good piece of art is usually simple.  Sometimes it could be Not Easy but nevertheless Simple.

All Soros does is to catch up with the latest happening in the world and then make investment decisions base on it.  Done !

There is no limit on the knowledge to acquire be it finance, politic or social.  When the data is inside our head, certain patterns form in it.  Then we try to relate these patterns to what we want to do - investment.  As time goes, certain linkages are form between the information and our investments.   These linkages are the formulas in our head.  These formulas usually cannot be written down clearly.  One of the reasons is by the time you write down on a piece of paper, certain event has happened that you may need to change your formula already.

All of us have this ability, like when interest rate is lower, everyone know more cash will flow in the market.  The difference is that a more experience guy would have more dimensions in his head to consider about the forest fire in Australia, the hail storm in northen America, the finish of China Olympia  ... all lead to exactly where the cash will flow to at what time.  At least he thinks so.

So the 'system' Soros use is very simple, its the same as all the other speculators who lost a lot of money.  The only differences is Soros has a very persisted way of keeping himself updated with the correct information.  While other loser speculators acted based on one or 2 piece of 'precious' info.  Secondly, other speculators are not as rich as Soros so even when they do the same thing as Soros, they will still lose out as his is the game of Money earn Money.

So like him or hate him, if you want to be him you better seriously get ready to digest what is happening to the whole world - every single piece of data.  Then you better be already very rich when you pratise what he is doing.  Else you may just be speculating into prey in this money earn money game.

The reason I don't talk much about Soros is because the line between speculation and investment in his method is very loose.  And statistically it is proven people will always stay at the wrong side of the line.

Lastly, be reminded that Buffet is the top 2 richest guy in the world and Soros stays within 20-40th in the rank (37th in 2007/8).

One of the Darkest day for KLSE:KNM

I recommended before KNM is a worth buying stock because its current price is below its worth. But today marks one of the darkest day for such a recommendation. Let's face it straight flat to the face and see what happens ...

First of all, the support lines for KNM is 0.40 followed closely by 0.395 as shown in graph below.





KNM has been re-bouncing or more correctly lingering around 0.40 support line for quite some time. A lot of speculator are waiting to queue at 0.40 but never got their wishes come true. Until today and they regreted their wishes were granted. KNM drops all the way to 3.70

Why and What Happen ?
First of all, let's review what support lines mean. It means the price may bounce back up when it touches that level but if it break that level then it will fall much further. In KNM, there is no apparent next support line and it will go FREE FALL if it breaks 0.395 !! Which in this case, once KNM drops below 0.395, it goes straight to 3.70 !!



Why and What Happen ?
Actually the answer was anounced later at 6:17pm

7164 KNM KNM GROUP BHD
Notice of Shares Buy Back - Immediate Announcement

Date of Buy Back : 27/02/2009
Description of Shares Purchased : Ordinary shares of RM0.25 each
No. of Shares Purchased : 1,500,000 shares
Minimum Price Paid For Each Share Purchased : RM 0.370
Maximum Price Paid For Each Share Purchased : RM 0.390
Total Consideration Paid : RM 574,005.00
No. of Shares Purchased Retained in Treasury : 0 shares
No. of Shares Which Are Proposed To Be Cancelled : 0 shares
Cumulative Net Outstanding Treasury Shares As At To-Date : 40,135,100 shares
Adjusted Issued Capital After Cancellation : 0
Date Lodged With Registrar of Company :
Lodged By :

27/02/2009 06:17 PM

Ref Code: 20090227NI00515

Actually one could have detected this as early as 10:06am when a series of constant high volume sell transactions are done.




If you remember the concept of supply and demand, when there are more selling than buying, the price will drop. Especially when the buying pattern consist of many small lots but selling is done by a few big quantity ! This means some big shots are selling off this stock !

This can be further observed at 12noon, 2:50pm, 4:10pm, 4:30pm and 4:40pm.



The green color shows the price. The red color shows the sell volume and blue is the buying demand.

You may observe you can hardly see any blue in that graph. So its almost no doubt this stock is going all the way down !

What to do now ?

If you have purchased this stock and already lost more than 10%, the general rule of thumb is to cut loss now. However, if you do not have any other better choices/stocks anyway and if you believe the fundamental business of KNM is still strong then you may choose to hold on to another 15-20% lost. All purely speculation at your own risk.

If you haven't bought this stock yet, you will need to find out what the next support line is and prepare to buy it assuming no new surprising news.

btw, KNM will be giving out 1.5 cents dividen early March. 1.5 cents out of 0.37 stock price is 4.05% pay out, which is better than today's FD @ 2+ % ( see top right for latest best FD rate ). And you could have earn this 'annual' FD rate in just within a couple of weeks ! Which is equivalent to a 100% annual gain. But ofcourse, stick to 4.05% is a more realistic figure.

So a lot of small players will be accumulating this stock like mad but there is no clear signal what the big guy will do. Supposingly in this no-support-line condition, price will drop like no one's business. I even suspect there is some internal dealing for this downside so the risk is still high on this stock where speculation is more than fundamental analysis.

The best reason to buy this stock now is you don't care about the dividen and recent lost of projects, if you know you can keep it for 2-5 years, this is still a keeper !

me ? I am accumulating more bullets and hope to hit jackpot yes ....

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Forex News Trading

One of the most popular ways traders determine entry and exit points in the forex market consists of trading off of major economic news events. The USD forex news generally gives the trader the most possibilities for profitable trades.

As an example, a trader expecting an improved GDP number for the Australian economy, might buy AUD/USD before the release of the economic data. Once the data is released, the exchange rate AUD USD will generally rise sharply if the number comes out better than expected.

The experienced trader will often take profits immediately upon the release of the data, taking profits regardless of their longer term opinion, and reestablish a position once the news is out.

Major News Items Which Influence the Forex Market

Of course, the online forex news is full of trading opportunities. Nevertheless, news trading relies on timely releases and reacting quickly to buying and selling opportunities.

Basically, realtime forex news is more consistent with a news trader’s objectives in initiating and timing entry and exit points when trading. A news trader is generally very selective in the type of economic releases or news items they choose upon which to make transactions.

Some of the more popular economic releases that traders choose for making forex transactions include:

• GDP – the Gross Domestic Product of any nation is of utmost importance to the value of their currency. The GDP represents the sum total of all products and services produced in the country and have a profound effect on the exchange rate of their currency in relation to the currencies of other nation’s currencies. The release of the GDP number of any major nation — especially the United States — presents trading opportunities for many seasoned professionals that keep a keen eye on the USD forex news. 

• Interest Rates – the value of a nation’s currency versus other currencies is strongly influenced by their central bank’s monetary policy. Interest rates exert enormous influence in the value of the currency as higher rates attract foreign investment, while lower rates send investors holding large amounts of money looking for a higher return elsewhere. A Euro currency forecast would not be complete without a careful analysis of the ECB’s monetary policy towards interest rate. 

• Employment Numbers – a nation’s level of employment gives a clear indication on the health of their economy. If a large sector of the population is employed, then the nation’s productivity increases raising the GDP of that nation. Many forex traders use employment numbers to determine whether to hold or short certain currencies. 

• Inflation Numbers – numbers such as the Consumer and Producer Price Indexes give traders an idea of how the central bank of that nation will implement monetary policy. Generally, high inflation is dealt with by central banks by tightening credit, while low inflation is commonly adjusted by a looser interest rate policy.

A seasoned forex trader will take into consideration all of the above fundamental indicators when making a USD Euro forecast for example. By the same token, many day and short term directional traders will take the opportunity of initiating trades based on the realtime forex news releases of these and many other fundamental indicators. 

For More Information Please Visit: forexguidehowto.blogspot.com/

why EPS, PE in stock valuation ?

Earlier I shared How to value a stock and decide when to buy at what price, and then give a real life example.

There are 2 main factors why a stock price goes up and down:

1) fundamental strength of that business ( Strong or Weak )

2) general public view points ( Positive or Negative )

So there are 4 combinations:

Weak Company Negative Views : Price Drops Continously

Weak Company Positive Views : Price Up and Fluctuate

Strong Company Negative Views : Price Drops to substanable level

Strong Company Positive Views : Price Up and Substain

You BUY Strong Company 

during its Negative Views time (3)

and 

You SELL during Positive Views ( 2 & 4 )

EPS or Earning Per Share shows you how much the business earn during a particular period.  Over the years, the EPS growth rate shows you how 'STRONG' the business is.  A consistently grown EPS shows that the business is able to conduct good business despite good or bad times.

PE or Price Earning ratio basically describes how many times a stock price is traded comparing to its earning.  For example, a business may be earning $1 now but its stock price is traded at $10, PE = 10x.

One of the usefulness of this PE is to show confidence level.  For example if I compare 2 businesses of the same nature, one is traded at 10x while another is only 5x.  That shows that general public is more confidence with one business than the other.

I can also examine all the PE numbers for all plantation stocks ( same industry ) and come up with an average or normalize PE, says 8x.  Then compare to the PE of the particular stock I am planning to buy, says 10x.  Then I know many others are also interested in this stock compare to other stocks within the same industry.

If I keep a historical record of PEs, I can also understand the stock price trend better.

So that is why I use EPS and PE, this combination tells me both the company strength and what the market thinks about this business.

Book Review : Top Money Tips - by KC Lau

One of the biggest achievements of this blog is to receive an invitation from KC Lau to review his book released late last year. The sense of being noticed is quite ... rewarding indeed.

I highlighted before the most interesting point in the book is How To Get Your First Car For FREE ! Most people like it a lot but soon there are also a few other not so positive comments about this particular tip. Which is rather important actually because it brings out TWO very important fundamental in personal finance planning - "its all about what you think" and "Personal Finance is boring".

If you think a tip is interesting, then most probably it will be useful to you.

If you think its a lousy tip, then most probably it will bring you nothing.

You can buy the book in most national book stores like Borders, MPH, Popular etc. I had documented my first hand experience with MPH. Very soon, the books were sold out and went into subsequent prints.

Most reviewers have already listed down the content outline of the book so I wouldn't repeat that.

What I would discuss is Why do you want to buy physical book ? Especially when there are alternatives like eBook and Blog on Internet for FREE ? Other than reasons of branding and that you are a fan of KC Lau then ofcourse you would buy his products to know him and his ideas better. There is still a very important factor that we buy books because of the information in it. Which may raise doubts in value for money comparing to other FREE sources.

1. Physical books are tax deductable up to MYR 1,000. Sometimes after I read a book, I resell it out getting back half the price. So I am claiming $2X from my income tax while actually paying out $X only. ( Sometimes I resell at higher price and earn a profit there too )
2. I like the convinience that I can pick up any book when I go to toilet, waiting for lover to finish shopping, queueing in hospital etc. By the time my smallest NetBook boot up and connect to Internet, I already finished reading half chapter in the book. When my turn is up, I can just flip the book and go immediately. Even if I put my notebook to standby mode for that extra split seconds only, the nurse, lover usually will change their mood from normal to complaint mode - "we thought you are waiting for us, not us waiting for you !"
3. Be it with Google or Yahoo, sometimes I find the info I want, sometimes I don't. Sometimes the info I found was there but quickly disappear the next time I look for it. Sometimes I remembered putting a bookmark but just couldn't seem to find it. Very often I am directed to pay for something anyway. With a book, I always know where to find the info once I get in touch with it, and I can start stop at any part of the book the way I like it. Its always there when I want to refer it ...

So fundamentally

1. The information on physical book is usually different than those available FREEly on Internet. Quite frequently information printed on book is more reliable too, proof read by proffesionals.
2. Even if the information is the same, book better organizes the info in a pre-determine way. The format could be better or worse but its consistency on where info is, ease us looking for it now and later.

Now back to the book "Top Money Tips for zzzzns".

What first attracted me is the reflection of this book on the author. Honestly till today I do not know who KC Lau is and has no personal relationship whatsover. But I can sense that the intention of the author of this book is PURELY wanting to share all he knows. Suddenly what he knows and what the book says become less important. It is very hard to find a person who are willingly share all he knows in personal finance world today, not to mention for the good for the community. ( rather than like what most of us do - keeps complaining only ).

I waited long enough to write this review just to make sure what I wanted to share was not already shared by other reviewers. And I hope some of you who has read other reviews can comment on this.

Frequestly after I read a book, I do not remember what the book says. But I can firmly share what I get out of it.

1. I pay more attention to car insurance, saving there could be significant enough as time goes
2. I make more money from Internet, perhaps thru some of the links the book suggested ...
3. I came up with the idea to resell the books I have read and no longer need to keep
4. I reminded myself not to be too self center in finance matters as many other approaches are possible too
5. ...

Would I buy this book ? Well yes and for the first reason I mentioned as my appreciation to someone who is so dedicated to share in personal finance matters.

Should you buy this book ? Well, if you agree with my reasoning why buying physical book is still a good thing then yes you should.

Would I recommend this book ? Now that is a question required scale answer. From 0 to 10 where 0 is Strongly NO and 10 is Strongly recommended, I would give this book a 7 - also a heavenly number :)

Where does the other 3 go ? Hmm ...

1. The writting skill can be more balance. Some chapters are exceptionally shorter ...
2. A small part of the book has too many numbers even though that was meant to be a quick mental exercise.
3. I personally could not fully agree with certain part of insurance concepts ...

It is also from the 1) and 2) that I got the impression on Author's sincerity. As for number 3), most of my insurance concepts may not be suitable for today's general public yet. Especially if you are not that well verse in insurance industry yet, then this book's explaination on insurance is much more suitable for you. You will have to understand the basics rule of thumbs first and then only come to me for some potential myth or paradox and fun discussion. Else that may lead to more damage and destruction.

Lastly, for people who read this review until here. You must be a very patient person. If you haven't bought this book yet and feel like getting one now, then I will add another reason to it both to thanks for your patient and see if my review is effective or not. For the next 5 books people buy through this article, they can get this book at MYR 21 only !! Instead of the normal price at MYR 29.90

Click here to buy "Top Money Tips For zzzzn" for RM 21 ONLY !!

Thank you to those who have taken above offers, surprisingly quite a few buyers actually didn't even realize the existence of malpf blog at all.  Seems like the 'cheap' price is more an attractive point than the review writen here.

I hope this does not violate any regulation ...

21st century Economy Politic Quadrant

The Economy-Political Quadrant may seems like telling where to keep or invest your money despite good or bad time.

It indeed works very well during 20th century. Unfortunately comes to 21st century, not only has the year changed, personal finance arena has changed drastically as well.

Gold has been speculated so much that it MAY no longer be the standard of money.

There used to be only 'property' in the city. Now there are satellite towns, suburbs ... agriculture lands and even dust bins ( recycle ) have become valuable estates too. While property remains the right category to invest into whenever economy is booming, but predict the right future seems like tougher than buying lottery.

Government bonds used to be de-Facto action when a country is stable. But in today's world, a country is as smart as a taicon's finance. One day they are the LARGEST, the next day they are GONE.

Stock market used to be the back bone of a country's economy. However, the market of derivatives has become so HUGE that the REAL and PHYSICAL is NO LONGER more real than VIRTUAL

So in 21st century, the element of Stock-Property-Funds-Gold is really questionable. However, one fundamental that doesn't change is that

you will have to identify what to do at what time that is BEST for YOU !

Hope you will find your own very best Economy-Political Quadrant soon !

Most Cost Effective Insurance in zzzz

If you are buying insurance for the first time or considering topping up protection to your life, there are some facts you should know :

1. each product ( insurance, FD, Mutual Fund) has its own strength ( see this post )

2. a hybrid product may give the best of both worlds

  2a. some hybrid products are called "Link" products  ( read here for varies type of insurance )

  2b. if you build your own hybrid, its called Buy Term Invest The Rest 

Not by conincident, 2a is usually offered by insurnace companies while 2b is usually offered by mutual fund companies.  Its just a matter of approaching the same purpose from 2 different angles.

If you are in zzzz, I would like to share with you A number : 328 !!

You can 'buy' a life insurance of MYR 328 with MYR 1 only !!

Therefore a MYR 50,000 Life insurance would cost about MYR 150 / year !!

So whatever extra cost you are paying for your insurance, you should expect them to provide you extra services and / or provide a good investment return.  Else you will need to relook into your portfolio because you are paying too much for your own ignorance.

note : 328 is the number for group term life and TPD protection only, its the most fundamental and simplest element I can find in local insurance industry here.

Property as an investment

Just a reminder that Car Loan interest rate is about 1.9X more than the House Loan.  Meaning a 3% car loan is almost as high as a 6% house loan.  Think again if you think car loan has a lower interest rate.  (click here to read more).

The fundamental of investing in property is not much different than buying a business to earn you passive income.  However, the nature of brick and mortal business is an Active Income generator, not a passive one.

VS

So you would need to be extra careful when using property as your finance tool to gain "Passive Income".

In simplest term, you HAVE TO make sure

1. you can rent your property out to fully pay for the monthly loan repayment
   
2. you budget in the fee you pay for professional to maintain your property including

Lawyer

Real Estate agents

Renovation

Interior Design if needed etc.

Without these 2, you cann't start property investment at all.  With this, there is no guarantee you can win big yet but at least you would at least pay less to learn the lessons.

Stock Picks methods 2009 02 24

First scroll down on forexguidehowto blog on the left hand side.  There is a link to download KLSE End Of Day data.

Select the latest date and you should be able to see a list of that day's stock data. 

Copy and paste that into a text editor


Subsequently use a spreadsheet program to filter out stocks between RM 0.10 to RM 0.50 (?)  then sort the stock list by volume.

There you go !  Here is a list of stocks that you may consider !

First, find something that you understand and like, have a strong feeling about etc.  For example;

You think oil price will go back up eventually, then you may want to look at KNM, Scomi, Ramunia etc.

You think zzzz has the best resources for furniture industry - LCL.

To understand what a business does, you may check from http://biz.thestar.com.my/  Just enter the stock name at top right corner and click search ! 

click on the Fundamental link to view more info about this company.  You may need to sign up as a member first.  I think it should still be FREE.

Then, make sure the company has been strong by making sure its pass years Return on Equity are always more than 15% !!

Then collect its pass years EPS and use this web site to calculate how much this stock is worth.

If current stock price is below its worth, then you can buy this stock as per the assumptions made in your worth calculation method.

Don't forget the Qualitative assesment - the management. Which is very important to make sure pass year records can be repeated in future.

Lastly after passing all the criterias above, you may use trend and technical analysis to further fine tune the timing of your entry point !

====

The following has ROE >= 14% for the past 3 years :

KNM

LIONDIV PANTECH RCECAP DUFU HUAAN HSL SCOMI LCL AZRB NTPM

After analysing the EPS growth trend
and calculated their worth,
revised with latest released EPS data
there is only one stock worth buying now

KNM worth is RM 1.10 and current price RM 0.405  ( seems suspicious but lets review this in detail next )

followed by 2nd best choice

PANTECH worth RM 0.41 but current price is RM 0.455.  Cann't buy now but just a small gap away.

The rest of the stocks has too big a gap between its worth and current market price so they are out for now !

One interesting stock is DUFU where I couldn't find enough data for assessment but its past 2-3 years record seems great except the most recent 2 years EPS trend downward.  ( which is common to ALL businesses )

Mutual Fund - service charge

Equity Mutual Fund is a fund that invests into stock market directly, usually either to (1) gain maximum capital appreciation or (2) receive constant dividen payout as an income.

The standard advice is to read the prospectus, understand the purpose of the fund before buying it.  Public Mutual is the largest private mutual fund company in zzzz and this is a sample of prospectus.  All the important stuff are highlighted at the top.

First thing that put people off is the varies charges and fees.  The biggest chunk is Service Charge at about 5%.

Because I put mutual fund in between Fix Deposit and Stocks in my pyramid, I can compare mutual fund with either FD or Stocks.

Mutual Fund vs Fix Deposit

The way I understand bank is they promised me a FD return and then use my money to earn a bigger return.  But bank does not disclose how much their cost is.  So if mutual fund is doing the same as what bank does, and if they disclose 5% as their 'cost', its ok for them to charge me 5% as long as my final return is larger than FD.  

My FD return now is 3%.  So if they charge me 5%, then their fund return should be AT LEAST 8%.  So I browse each and every fund for their past 1 year return from this link.  

Unfortunately a lot of fund shows a huge drop in late May and I don't really know why.  Before I find out why, I also decided I should look for one fund that is as steady as FD and should have a Always Up trend.  ( a new requirment I add after I browse these graphs )

Finally I found one, like below.

So this seems like one mutual fund that I can use to replace my Fix Deposit.  From the chart itself, it seems like despite the current market down turn, its producing 50% return for the past 1 year.  So I would consider this to replace my FD.  

Mutual Fund vs Stocks

My stock invesment is charging me 0.7% each time I have a transaction.  Meaning each time I buy and sell a stock, I am charged 1.4% of its average price.  Mutual fund charges me at 5% which is quite high.  However, if I buy sell 4 stocks, then the total charges I have paid is 5.6%; which is quite equivalent to the charges I paid to mutual fund.  So if I can find one mutual fund that already invest into 4 or more stocks that I am interested in, then its worth while for me to buy that mutual fund, else I will pass.

Like wise, the factor is 4x.  Says if my normal stock investment practice is buy and sell within one year, then the only time I would buy that mutual fund is if I plan to keep that mutual fund more than 4 years.  On the other hand, if I buy sell a stock more than 4 times a year, then it may be worth while to buy the mutual fund and keep for one year instead.

So finally I come up with a formula for myself about mutual fund investment as an alternative to stocks, for my own portfolio :

Basically the formula says, instead of me buying and selling many stocks many times, I may as well leave it for the fund manager to do it.  The 5.5% charges is relatively low IF compare to my large number of transactions.

Like wise, if I am interested in one particular company and plan to buy its stock to keep for life, then I should NOT consider mutual fund at all.

I have 2 sets of stock invesment account, (1) one is long term where I plan to keep them forever, (2) the other is where I 'play' with the speculation using all kind of methods.  Account (1) has nothing to do with mutual fund.  But I use a lot of mutual fund as the 'base' for my Account (2).

In Account (2), one month alone may already have more than 20 stocks transations.  So the 5% charges in mutual fund does not really bother me that much relatively.

I also have many mutual funds before I learn to buy stocks and started my own businesses.  Most of my mutual funds are more than 15 years old.  So 5.5% / 15 years = 0.367% per year.  Agains, doesn't bother me that much, especially when I don't need to do anything about them - a passive generator.

When I was shopping for what mutual funds to buy, I also learn that buying mutual fund means buying an industry.  For example, I know that    - h a l a l -   business in zzzz is a good business in the sense that they will produce good income regardless, due to varies specific reasons including the unique economy policy.  I personally pursue for absolute freedom in open market so I do not really support those policies.  Hence I really have no interest to learn nor understand those businesses.  As a result I will not be able to buy those stocks with informative decision.  But I do have the 'general' idea that they will earn money despite the market fluctuation.  So Ittikal fund is one of the biggest portion in my portfolio for the past few years.

When I have some GENERAL ideas 

about an industry or a trend 

but I do not have interest

to learn the details

I choose a mutual fund

that matches my GENERAL idea.

And personally I do not mind paying someone 5% to help me check if my general idea is correct or not, for the next 5-10-20 years.

Note :  Not all mutual funds are charging 5.5%.  Some are lower than the others.  You may shop of cheaper fee mutual fund but I don't really recommend that.  Because when a fund manager is using 'lower fee' to attract investors, that also implies that fund manager has 'no confidence' that his portfolio can do better than the other fund managers.  If he is 'not sure' about his return, then most probably he is more speculating than performing fundamental invetments.

Lastly, do remember that Fund Manager is more important than the fund itself.

Forex Day Trading Day Trading Doesn't Work So Don t Try It

The logic of day trading is totally flawed and will never make you money over the longer term and will wipe out your equity. If you want to prove it ask anyone who says it does to give you a real time track record of profits and you won t get one. Why? Because day trading does not make money. Before we begin, you may ask yourself why there are so many people claiming they make money at day trading? Well the answer is it s a good story and appeals to peoples greed.This creates system sales and revenue for the vendor OF these day trading methods so they make money you lose. Here are the reasons day trading does not work: 1. Time Period A day is to short a time period to judge market trends accurately. Think about it. Trillions of dollars are traded everyday and prices can go anywhere and there is no way of guessing what the volatility in a day will be or the direction. Short term moves are simply random.
You could probably flip a coin and do as well as most day traders. 2. Stops Day traders use the daily range to buy and sell and set stops. Stops therefore tend to be close to entry by the very nature of day trading. Volatility in a single session is impossible to judge and most times simply picks off the stops and creates small losses which add up.3. Banking profits early Most day traders are looking to scalp a few pips here and there. They do have some wining trades (more by luck than by judgment) but of course they break the fundamental rule of trading leveraged investments which is:Run your profits to cover your inevitable losses. As they have a lot of losses and marginal profits the net result is the erosion and eventual wipe out of account equity. Day Trading is a good story, but in reality day trading doesn t work over the long term. Simply ask any vendor who sells a day trading system for this:A real time track record of their profits over 3 years and see the answer you get. The conclusion from all of this?
You guessed it Avoid day trading if you don t want to lose your money.
By: Sacha Tarkovsky
Article Directory: http://www.articledashboard.com
FREE FEATURES AND ESSENTIAL TRADER PDF DOWNLOADS On all aspects of becoming a profitable trader and more on profitable forex trading methods visit our website at www.net-planet.org/index.html

What is the correct EPS to use ?

I mentioned before how to evaluate how much a stock is worth and what is is safe buying price and even come up with a system to calculate that.

Does this method guarantee success and nothing will go wrong if I follow this method ?  Ofcourse NO !

Just to re-enforce my stand point in Personal Finance is that one should setup an automated saving system and that would be THE ONLY thing I do NOT give way ... so far.  All others are just methods to increase chances of higher return, and all methods are to be fine tuned whenever needed.

Back to this stock valuation method.  The real Fundamental about business valuation is its management.  ( A good management can turn a lousy business into a good one vice versa.)   This stock valuation method is only a quantifiable way to analyse if the management has done good in the past.  Its ok if the management has been changing a few times in the past but if the management has changed drastically at the time you are analysing the old data, then you cannot be sure what you are analysing may happen again.  In that case, qualitative accessment may need to come first before you perform this quantitative valuation using EPS and PE.

Basically what this stock valuation method does is to take away most of the variables and narrow down to 2 only : EPS and PE.  So if you use the right EPS and PE, then you will get the Right assessment.  

However, if you really understand what these 2 numbers mean, there is no such thing as Right EPS and PE !  Therefore using the best figures still go back to the art of finding best matched answers.  Anyway, this is how I determine what EPS I use during stock valuation.  You may use it as reference either way.

1.  I first plot down all the past year EPS data into a graph

2.  then I find out a linear trend of that graph

3.  then I find two years' EPS that can best match the linear trend

For example, the blue dotted line below is the EPS graph for KNM.  The straight solid black line is the trend line.   I find that year 2006 EPS exactly fall on the trend line so I will use 2006 EPS.  At the other end, the trend line cross the EPS graph between 2000 and 2001 so you may use either one of them.  I want to be conservative at recession time like this so I use 2000 which will show a slower growth - which is what I would expect the company to be at time like this - slower growth.

After a while, I still think EPS growth rate from year 2000 to 2006 may or may not be able to repeat in 2008 to 2014.  So I further assess the situation more conservatively assuming worse growth so I use 1999 to 2004 EPS.

Basically I have made 2 projection base on what I want to feel more comfortable about, in this case all I want is to be more conservative and play safe in today's situation.

My 1st assessment is what I normally do so that is what I hope to happen.  My 2nd assessment is my worst case scenario taking into consideration of my expectation they will not be able to grow as much as they did before but yet strong enough to continue growing.  So if both assessments give me positive results then I would be able to consider further to own this business.

An example of using the wrong EPS would be using 2004 to 2007 EPS to calculate future growth for 2009-2012 which I think is a bit over optimist.

Hope this helps a bit on question like which EPS to use ...